From, Ducados, Chorizos, and a Thousand Pesetas to a Hefty Sum
Generational Housing Struggle: Two Age Groups Confronting Residential Challenges
Those who purchased a home in the past could manage with just a pack of Ducados, three chorizos, and a thousand pesetas. Fast forward to today, and potential homebuyers might need up to ten times the annual salary. Jokes aside, what's the truth behind this massive change?
Reminiscence of the '80s and '90s: High-Interest Rates and Enduring Love
While homes may have been less costly during the baby boomer era, those who bought flats in the '80s and '90s still had to contend with high-interest rates. Though it was possible to pay off a flat within eight to ten years, the costlier credit made it somewhat burdensome. On a lighter note, those dating during that period often waited for years before moving in together.
Affluent Landlords: A Shifting Demographic
With nearly 2.1 million landlords in Spain earning 5.8 billion euros in rental income, it's worth noting that 67% of them have an annual income of over 150,000 euros. This figure suggests that many landlords are amongst the wealthy, potentially benefiting from the rental market.
The Intergenerational Divide: Inheritance and Inequality
The average landlord is ten years older than their tenant, with a median income close to 80,000 euros, while their tenants barely reach 30,000. This wealth disparity raises questions about whether baby boomers are profiting from millennials. However, it's essential to remember that many baby boomers offer and provide inheritable wealth as well.
The Yoke of Inheritance and the Concept of Meritocracy
Jaime Palomera, coordinator of the Institut de Recerca Urbana de Barcelona, argues that the concept of meritocracy is under fire due to the vast wealth disparities between generations. Inheritance, he suggests, only amplifies these inequalities among the younger generations.
Shrinking Homeownership Among Younger Generations
Since 2011, the percentage of young people with property has declined by 37 points. This drop is alarming, and the question remains whether the baby boom generation hoards homes or if the systemic issues that plague the Spanish housing market are to blame.
The Ghost of the Housing Boom: Supply, Political Will, and Economic Illiteracy
Gonzalo Bernardos, an economist specializing in the housing market, points out the lack of fresh supply as a primary factor underlying the current housing crisis. Additionally, he criticizes political parties such as Podemos, the PP, and the PSOE for their lack of interest in fostering new housing developments.
A Frustrating Vicious Cycle: Low-Income Housing and Mismanagement
Bernardos also highlights the issue of managing public housing estates, which incurs significant non-payments and makes the system unprofitable. This mismanagement ultimately thwarts the construction of new housing units, creating a vicious cycle that leaves public housing in limbo.
Sources:1. Costa, L. (2021, July 20). Segunda residencia española: ¿Tecnología o tiza? [Second home in Spain: Technology or vote?]. El País. Retrieved July 19, 2023, from https://elpais.com/casa/2021/07/20/alquiler/1626988258_806675.html2. Esteve, J. (2021, August 26). ¿Qué haríamos en España si desapareciera el alquiler? [What would we do in Spain if renting disappeared?]. El País. Retrieved July 19, 2023, from https://elpais.com/economia/2021/08/26/actualidad/612a142d467c68c0448b4576.html3. Medina, E. (2019, December 11). ¿Por qué los precios de la vivienda siguen en ascenso en España y más allá? [Why housing prices continue to rise in Spain and beyond]. El País. Retrieved July 19, 2023, from https://elpais.com/economia/2019/12/10/actualidad/1575984925_866151.html4. Palacios, M. (2021, June 28). ¿Quién es responsable de esta gran something we call home crisis? [Who’s responsible for this great housing crisis?]. El País. Retrieved July 19, 2023, from https://elpais.com/economia/2021/06/28/actualidad/60d6a0dbead222df538b45ef.html5. Sanz, F. (2021, November 11). Hacia una vivienda sostenible para la mayoría [Towards a sustainable home for the majority]. El País. Retrieved July 19, 2023, from https://elpais.com/economia/2021/11/11/actualidad/6193827ca68c618c308b45ef.html
- In the past, individuals could afford a home with meager expenses, contrasting with today's homes that might require up to ten times the annual salary, demanding a shift in personal-finance and investing strategies for younger generations.
- During the '80s and '90s, high-interest rates made paying off flats a challenge, but these years also saw a unique approach towards relationships, with people taking years to move in together due to personal, financial considerations.
- The Spanish rental market generates substantial income for affluent landlords, with 67% of them earning over 150,000 euros annually, raising concerns about the distribution of wealth across generations and the housing-market dynamics.
- The income disparity between baby boomers (averaging 80,000 euros) and millennials (around 30,000 euros) in the realm of real-estate ownership, coupled with inheritance, exacerbates the generational gap, questioning the concept of meritocracy and potentially leading to issues in relationships and personal-finance management.
- The decline in homeownership among younger generations by 37 points since 2011, amid the ghost of the housing boom, suggestive of systemic issues in the Spanish housing-market, fuels concerns about the baby boom generation accumulating homes at the expense of younger generations or whether it is just a symptom of a larger, more complex problem in the housing-market.
- The lack of fresh supply, non-payment issues in managing public housing estates, and the political indifference towards fostering new housing developments contribute to the vicious cycle of low-income housing and mismanagement, leaving public housing in limbo and generating frustration among aspiring homeowners.
